U.S. Oil Prices Rally Above $65 After Crude Stocks Fall More Than Forecast

Investing.com – Crude prices extended gains on Wednesday, with the U.S. benchmark hitting its strongest level in around three years after data showed domestic oil supplies fell more than forecast last week.

The U.S. Energy Information Administration said in its weekly report that crude oil inventories declined by in the week ended Jan. 19. That was the tenth consecutive weekly drawdown and compared with analysts’ expectations for a decline of around 1.0 million barrels.

Supplies at Cushing, Oklahoma, the key delivery point for Nymex crude, decreased by last week, the EIA said.

Total U.S. crude oil inventories stood at 411.6 million barrels as of last week, which the EIA considered to be in the middle of the average range for this time of year.

U.S. crude oil production rose by 128,000 barrels per day (bpd) to 9.87 million bpd, the highest level since the early 1970s and close to the output of top producers Russia and Saudi Arabia.

The report also showed that gasoline inventories increased by , compared to expectations for a gain of 2.4 million barrels. For distillate inventories including diesel, the EIA reported a rise of .

U.S. West Texas Intermediate (WTI) tacked on 65 cents, or around 1%, to $65.14 a barrel by 10:40AM ET (1540GMT), their highest level since Dec. 2014. Prices were at around $64.52 prior to the release of the inventory data.

Meanwhile, futures, the benchmark for oil prices outside the U.S., were up 7 cents at $70.03 a barrel, not far off the Jan. 15 three-year high of $70.37 a barrel.

Oil prices have risen almost 50% from around $43 a barrel in June, benefiting from production cut efforts led by the Organization of the Petroleum Exporting Countries and Russia. The producers agreed in December to extend current oil output cuts until the end of 2018.

The deal to cut oil output by 1.8 million barrels a day (bpd) was adopted last winter by OPEC, Russia and nine other global producers. The agreement was due to end in March 2018, having already been extended once.

Analysts and traders have recently warned that U.S. shale oil producers could ramp up production as they look to take advantage of higher prices, potentially derailing an OPEC-led effort to curb excess supply.

In other energy trading, shed 0.1% to $1.905 a gallon, while tacked on 0.3% at $2.093 a gallon.

rallied 11.0 cents, or 3.2%, to $3.553 per million British thermal units. It soared to its on Tuesday, boosted by forecasts that call for frigid temperatures again in parts of the U.S. during early February.

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